SC Capital Access Program (SC CAP)
SC CAP Forms
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The SC Capital Access Program (SC CAP) lending program, which began in 2007, is designed to provide financial institutions operating in South Carolina a flexible and non-bureaucratic tool to make business loans that are considered more risky than conventional loans and that may not meet conventional underwriting standards. It uses a small amount of public resources to generate a large amount of private financing to many small businesses that might not otherwise be able to obtain conventional financing.
SC CAP is based on a reserve fund concept and is fundamentally different from traditional insurance or guarantee programs which guarantee individual loans. Rather, SC CAP works on a portfolio concept. In other words, if a financial institution participates in SC CAP, a special reserve fund is set up to cover future losses from a portfolio of loans that the institution makes under the program. The SC CAP reserve fund is not specific to individual loans, but is used to offset losses on any loan in the participating financial institution’s SC CAP portfolio. Each loan made by participating lenders is earmarked in its institution’s name, and the institution may withdraw funds from the reserve fund only to cover losses on loans made under the program.
The program is flexible as the financial institution makes its own credit decisions, set its own underwriting standards, and then simply enrolls the loan under SC CAP. The financial institution solely determines the rate structure, terms and fees to the borrower. Further, the financial institution uses its own note, mortgage and any other closing documents necessary to complete the transaction. The institution makes the loan and simply delivers a Loan Filing Form (see link above), along with payment of the reserves funded by the borrower and financial institution to BDC within 10 days after the loan is closed. Enrolling loans under the program is thus designed to work essentially as an automatic process. There is no processing delay, and virtually no paperwork. This means that the small businessperson can get a quick response to a loan request and a much faster disbursement of funds.
The reserve fund is provided by and owned by the State of South Carolina, yet is managed by BDC.
- Any business loan, short or long-term, to a corporation, partnership, joint
venture, sole proprietorship, cooperative or other entity that carries on a business
activity for profit in the state of South Carolina. For purposes of this
program, a small business means:
- Retail/service with annual sales not exceeding $2,000,000;
- Wholesale with annual sales not exceeding $5,000,000;
- Manufacturing with no more than 50 employees; and
- Any other business with annual sales not exceeding $2,000,000
- The maximum loan amount shall not exceed $100,000 and the aggregate principal amount of all enrolled loans to the borrower shall not exceed $250,000.
- Loans currently in the financial institution’s portfolio shall not qualify for SC CAP. Please refer to the Lender Participation Agreement for additional eligibility conditions.
Once the financial institution has approved the financing for enrollment in SC CAP, the institution then determines the reserve deposit contribution to be paid by the borrower based on the financial institution’s perceived level of risk. Reserve deposit contributions paid by the borrower range between 1.5% and 3.5% of the loan amount, which must be matched by the financial institution. Both the financial institution and borrower’s reserve deposit contributions are non-refundable.
SC CAP contributes a fixed matching reserve deposit contribution of 1.5x the total reserve deposit contributions from the financial institution and borrower (click to view in chart format). All of these contributions are then placed in a loan loss reserve fund established for the benefit of the financial institution. In the event of a default on an enrolled loan, the financial institution can draw funds from this reserve to offset its loss.
Benefits to Lending Institutions
Lending institutions participating under the SC CAP benefit in a number of different ways:
- Cost — there are no initial costs to participate in the program
- Simplicity — there are few forms and no delays as the lender solely makes the credit decision and chooses whether or not to include the loan in SC CAP and at what reserve level
- Coverage — Capital Access Programs have existed over fifteen (15) years with the loss reserves generally covering losses on loans enrolled in the programs
CRA — Both State and Federal authorities are aware of other CAP programs around the country and have recognized participation by awarding CRA credits in the past. SC CAP represents another way that BDC is able to carry out its corporate purpose of economic development and job creation.
Participating Financial Institutions
1st Federal of South Carolina, FSB
Bank of Clarendon
Carolina Alliance Bank
The Citizens Bank
Congaree State Bank
First Citizens Bank
First Community Bank
First National Bank of SC
First Reliance Bank
First Federal of Charleston
Harbor National Bank
The Palmetto Bank
South Carolina Bank & Trust, NA
South Carolina Bank & Trust - Piedmont